Forum:What is the best economic system?
List of economic systems *Barter *Capitalism **Laissez-Faire **Mixed economy *Communism *Feudalism **Manorialism *Socialism Please help fill this in. Capitalism First off, capitalism is not only the best economic statement, but I will be so bold as to say it is the ONLY economic system, as all other systems can be described as varying degrees of denying capitalism. Begin flamewar. Capitalism is superior to all other economic systems two reasons: it's cheap, and it's fair. First off, it distributes wealth efficiently. That is, it's cheap. I'm a computer manufacturer in Oklahoma. I sell computers. I buy parts to build these computers. From what companies do I want to buy? Those with a combination of low prices and good products. I don't buy from manufacturers with low quality and a high price if I want to make money selling computers. I don't buy from a company because they're really nice (I don't need support; I'm smart enough to build a computer). I don't buy because they need my money. I don't buy because it's Asus Wednesday. I buy because I think I can make money building a computer with a part from Asus. It's that simple. Assuming that the vast majority of computer builders in the world are like me (i.e. they want to make money), companies that make crappy motherboards will go out of business. Maybe that's sad and heartbreaking and evil and hateful. But it's also cheap. Welcome to economics. Capitalism is also fair. Not equal. Fair. There's a difference. If there was a sudden requirement that you needed to pass a calculus exam in order to get a driver's license, that would be equal. It would not, however, be fair (Calculus has nothing to do with driving; math profs would have an unfair advantage). Capitalism puts up with none of that nonsense. All ideas are not treated equally--some are work better than others. Period. Good business decisions will be rewarded, bad business decisions will be punished--not by a court or a judge or a president or a government or even a really big group like voters or consumers or whoever--but by everyone: the people selling, the people buying, the people shipping all play a hand in deciding reward and costs. Not an equal hand. A fair hand. No, if you're bagging groceries, you can't directly control the price of grapes. But you control it indirectly--your wages, your hours, your attitude towards other grocery baggers, and the experiences potential grape-buyers have when shopping at Albertson's. You have a very small 'vote' in the grape price. Not an equal vote. A fair vote. All other economic systems require governmental regulation. Regulation costs money. Period. Regulation systems are (usually) more equal and (always) less fair. Period. Regulated systems are less cheap. Regulated systems are less fair. Capitalism wins. Compaqdrew 22:40, 8 September 2006 (UTC) This first sentence from the previous post is remarkable: "First off, capitalism is not only the best economic statement, but I will be so bold as to say it is the ONLY economic system, as all other systems can be described as varying degrees of denying capitalism." This person is saying that capitalism is the only ecomomic system because all the other systems are not capitalism. Remarkable! Does this person think before he writes? Here we have a new type of logic. Tennis is the only sport because all other sports can be described as varying degrees of denying tennis. On the other hand, basketball is the only sport because all other sports can be descibed as varying degrees of denying basketball. The logic of this person leads us to conclude that tennis is the only sport and basketball is the only sport at the same time. Since that cannot be, we conclude that either there are no sports, and what we play is just an ilussion, or that tennis and basketball are identical sports. After reading that first sentence, I am so depressed that I lost interest in the rest of Compaqdrew´s post. --RedRoseSpartakus 18:10, 11 September 2006 (UTC) :"The logic of this person leads us to conclude that tennis is the only sport and basketball is the only sport at the same time." :That's a gross misrepresentation of my logic. Tennis and basketball are only related insofar as they are all sports. That is, tennis is not 'better' than basketball and neither could basketball ever 'replace' tennis. Economic systems are not different sports that we can choose to play when they suit us. They are theories of economic thought that can be tested, revised, and refined a la Scientific Method to match reality. :And reality shows that free market capitalism is successful, and that other systems are not. Joe Schmo with a map can tell you that societies that are economically regulated (not capitalism) will become totalitarian. That's just how it is. :Free-market capitalism is exactly what it sounds like: a free market. It's like a blank sheet of paper. Socialism is a free market with a safety net drawn in. Feudalism is a free market with some sharecropping boundaries thrown in. Stalinism is a free market with "We'll kill you if you open a business" written at the bottom. It's neither stupid nor depressing to logically conclude that, holy crap, all of these systems are based on a free market (blank sheet of paper). :But couldn't the reverse be true? Couldn't Socialism be the master template, with capitalism merely a paper with the penciled-in safety net erased? It's an interesting argument, but rather silly once you begin to examine it--what does Feudalism have in common with Socialism? What does Mercantilism have to do with the Japanese System? :The common denominator linking ALL disparate economic systems is that, in all systems, there is some limited form of free trade. That's it. Some systems have active government regulation, some have profit-sharing, some have rewards and incentives, but all systems have to have limited free trade occur. No other such 'common demonator' exists. All economic systems must therefore be based on a system involving free trade. Free trade is capitalism. Compaqdrew 22:24, 12 September 2006 (UTC) ::I think I understand what you're saying. You seem to mean that all systems other than capitalism are just inefficient capitalism, capitalism plus needless rules. Okay, maybe. However, although I'm prepared to agree that the free market, plus sufficient social safety nets, not to be confused with market regulation, is the best economic system out there, what we have in the US isn't that. ::We have capitalism. Capitalism is characterized not by fairness, but by the investment of money with an expectation of profit. A truly free market would be characterized by profit as a fair reward for effort. Work should pay; money should not pay. What is it that keeps capitalism from being a free market economy? Corporate power. Like it or not, our market isn't fair. Some people have advantages to which others have no access. Those with money make more, and those without tend to make very little. Our system is an improvement over some that came before it; I had to add the qualifier "tend." Our system is more open to changes in status, but not in proportion to the quality of work or ideas. A person has to work hard, be smart, and be lucky to start off poor and end up rich. ::Another problem is that Thomas Friedman is both right and wrong. Actually, he's almost completely right; in his book The World is Flat, he admits that it isn't quite flat yet, but we act like it is. Some businesses have the ability to take advantage of both the flat aspects and the unflat. They can reach foreign markets with their products, a result of greater communications and travel, but they can also take advantage of unfair sources of goods. The American worker and the Chinese worker, for example, are not on equal footing. In this case equality is exactly what is needed; they need to have the same framework within which to market their labor, or one has an artificial advantage. Collective bargaining helps the American worker more effectively sell his labor to his employer, both providing benefits and raising the cost of that labor. Chinese workers do not have the ability to make that choice. The cost of their labor is unfairly suppressed. Some businesses have the ability to take greater advantage of this situation than others. Their success breeds more success at the expense of competition. Capitalism actually suppresses competition at the expense of that fairness and efficiency you claim to value. ::In comparison, a free market is characterized by competition, and that competition leads to both greater quality and greater efficiency for all players. Right now, America has too little regulation in some ways, and too much in others. Our tax laws choke off many business opportunities, both for corporations and for smaller businesses. That's too much regulation. On the other hand, anti-trust and laws are too rarely applied. We need some regulation to protect competition, the engine that should drive our economy. It isn't as bad as it could be, but it could also be a lot better.DeusVolt 23:25, 12 September 2006 (UTC) :::You seem to be taking a fairly-sane position, or at least a saner position than I'm used to hearing. I will agree with you that there's an awful lot going wrong with our economy. But here's the rub: free trade IS fair trade. Nobody would engage in trade unless BOTH parties thought it was fair. In a free market (which I will agree we don't have), people engage in trade because they think it's fair. All trusts and 'monopolies' (meaning the non-government-instigated kind) aside, if I don't think $10 is a fair price for shoes, I won't buy them at that price. I'll make my own, I'll import them from China, or I'll do without; but if it's not worth spending I will not spend it. Compaqdrew 21:30, 13 September 2006 (UTC) ::::Ok, how do we reconcile this with the situation where we only have choices we don't like. Like great prices on shoes that I can't afford anywhere else, but reports from the Chinese media about the conditions that the workers who made those shoes are living in? I would love to buy clothes and shoes made in the USA, and that would be my choice if I would be given that choice. I'm not being given that choice, because every US manufacturer of clothes and shoes are driven out of business by the low prices available from non-US suppliers to our retailers. You seem to be talking about economic theory, but we live in the real world. Chadlupkes 21:54, 13 September 2006 (UTC) Capitalism: an alternative view "Free market theory" is a tool of economists. It's a simplified model of how things work: absent constraints, how does human nature determine economic behavior? Like the "ideal gas theory" in physical chemistry, it describes no real system exactly, but it helps students develop an understanding of the factors involved in the workings of real systems. This theory has been politicized as it has been popularized. Human Action, by Ludwig von Mises, presents the theory with few value judgements and only limited claims for its predictive power. Mises emphasizes the fact that the theory is derived from human nature, and therefore applies to any economic or political system. However, Ayn Rand, Milton Friedman, and many others have created a large body of work that confuses capitalism as it exists in real life with the purely hypothetical free market system. Capitalism, in this view, is or could become the final perfect product of social evolution. The values placed on things and people by the capitalist system - the "free market" - are seen as having been dictated by the realities of the marketplace and therefore as intrinsically fair. This view is very far from being a complete picture of a real economy, much less a livable society. In the first place, the free market model fails to capture important facts about the system it attempts to model. For example: 1. Because demand, in the economists' sense, is a measure of the amount of money chasing a given good, it acts as a one-dollar-one-vote election. Advocates of "free markets" consider it fair that rich people have many votes in the election and poor people have few. There may be more economic demand for expensive cars than for affordable mass transportation, even when the latter affects more people in a more fundamental way. The postulated "fairness" of the resulting allocation of resources will not be perceived by the working poor who have to live with it. 2. Because supply and demand are observable only for goods and services that can be bought and sold, important costs and benefits may be completely absent from economic calculations. Environmental pollution and the health and safety of workers and customers are obvious examples of external costs that can only be redirected toward producers by regulation. A more abstract good that can't be purchased at any price is freedom from the stresses caused by social inequality. To make this more concrete, just remember the two million Americans in prison, jail, or probation systems, and the twenty thousand or so murders per year. These costs, unequalled among similarly advanced countries, and far more significant than "terrorism," are the signature of a society that tells millions of its people that they don't really matter. In the second place, capitalism as it exists is far from the "free market" ideal. It represents not freedom from regulation, but the presence of a very highly-developed system of regulations. Complaints about regulations that cut profits mask the fact that other regulations make profits possible. Even a system that merely guarantees rights to exclusive control of physically real property to individuals requires a public sector. Someone has to record property transfers, to serve as a neutral arbitrator, and to enforce the arbitrator's decisions. A police force has to protect owners' sovereign rights over their property, and a military force has to protect the whole system from attacks from outside. All this has to be paid for, despite the fact that a public sector's assertion of a power to tax violates the unconditional property rights the model assumes. Many more regulations are needed by more advanced manifestations of capitalism, with its ever more complex rules governing abstract "intellectual property," and enforcing the "harmonization" of the world's financial and legal systems into an integrated machine that gives the owners of capital easy access to the world's most valuable resources and its cheapest labor. Above all, modern capitalism depends on the complex body of regulations that creates corporations and defines the respective rights and duties of a corporate entity's investors, executives, customers, workers, suppliers, and neighbors. Without those laws, corporations can't exist. Could the necessary support system be privatized? If large property owners individually make and enforce their own laws, what we have is feudalism, the legitimacy of which rests on brute force. That would be the end of "free" anything, except for the Sadean or Nietzschean freedom of the strong to take whatever they want. But if the large property owners agree to finance a public sector that would meet all their needs, would remain neutral in their disputes, and would avoid market interventions that might be harmful to the capitalist class, a stable oligarchy could be constructed. Such a system would not be a democracy, but could be concealed within a representative democracy to the extent that "representatives" understood that they were representing the people who financed their campaigns rather than those who voted for them. A two-party system and a corporate-controlled mass media could filter out candidates who wouldn't make themselves useful to the ruling elite. Current experience shows that a surprisingly large segment of the population can be led by the traditional rhetoric of conservatism - limited government, nationalism, and faith- or tradition-based opposition to intellectual elites - to support the kind of government power that the oligarchs need. Identifying these features of capitalism is much easier than correcting them. Violent attempts at reform could easily create outcomes much worse than the current situation, and only the kind of tentative and limited reforms that Karl Popper calls "piecemeal social engineering" has any chance to modify the system of regulations in such a way as to distribute the benefits of social activity more widely. But the pseudo-conservatives have been so successful at demonizing "liberals" and "social engineers" that the capitalist system may persist in its ways until it self-destructs through some combination of fossil-fuel dependency, faith-based finance, imperial overstretch, and, eventually, the end of the illusion of the ruling elites' legitimacy. Deadplanet 05:00, 15 September 2006 (UTC) See also *Forum:What is the best form of government? Category:Economy